This form set up what is known as present interest trusts, with the intention of meeting the requirements of Section 2503(c) of the Internal Revenue Code.
Trust Agreement for Minors Qualifying for Annual Gift Tax Exclusion - Multiple Trusts for Children
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Gifts that are not more than the annual exclusion for the calendar year. Tuition or medical expenses you pay for someone (the educational and medical exclusions). Gifts to your spouse. Gifts to a political organization for its use.
The primary way the IRS becomes aware of gifts is when you report them on form 709. You are required to report gifts to an individual over $14,000 on this form. This is how the IRS will generally become aware of a gift.
If you give more than $15,000 in cash or assets (for example, stocks, land, a new car) in a year to any one person, you need to file a gift tax return. That doesn't mean you have to pay a gift tax. It just means you need to file IRS Form 709 to disclose the gift.
You may need to file a gift tax return If you make a taxable gift (one in excess of the annual exclusion), you must file Form 709: U.S. Gift (and Generation-Skipping Transfer) Tax Return. The return is required even if you don't actually owe any gift tax because of the $11.58 million lifetime exemption.
A Section 2503c trust is a type of minor's trust established for a beneficiary under the age of 21 which allows parents, grandparents, and other donors to make tax-free gifts to the trust up to the annual gift tax exclusion amount and the generation skipping transfer tax exclusion amount.
The value of all gifts made during the year to a single beneficiary count towards the donor's $15,000 annual exclusion, no matter what their form. Thus, if you give your child a $10,000 automobile, you have used $10,000 of your annual exclusion and have $5,000 left to give that child within the annual exclusion amount.
The annual exclusion is the amount of money that one person may transfer to another as a gift without incurring a gift tax or affecting the unified credit. This annual gift exclusion can be transferred in the form of cash or other assets.
4. Do gifts to a Gift Trust qualify for the annual exclusion?Gifts in trust do not qualify for the annual exclusion unless the trust either qualifies as a Minor's Trust under Internal Revenue Code Section 2503(c) or has certain temporary withdrawal powers called Crummey powers.
Trusts for minors, or minor's trusts, are very specific types of trusts that are used to hold and distribute property or assets to minors. They typically provide instructions that the money or property assets will be held in trust until the minor reaches the age of majority.